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Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Ray Alvarez X-To: Tim Belden, Mike Swerzbin, Michael M Driscoll, Matt Motley, Robert Badeer, Diana Scholtes, Sean Crandall, Chris Mallory, Jeff Richter, Tom Alonso, Mark Fischer, Phillip Platter, Carla Hoffman, Christopher F Calger, Michael Etringer, Steve C Hall, Christian Yoder, Tim Heizenrader, Stephen Swain, Jeff Dasovich, Susan J Mara, Joe Hartsoe, Ray Alvarez, Elliot Mainzer, Bill Williams III, Paul Kaufman, James D Steffes, Phillip K Allen, Mike Grigsby, Don Black, Neil Bresnan, Jubran Whalan, Dennis Benevides, Jess Hewitt, Louise Kitchen, John J Lavorato, Greg Whalley, Richard Shapiro, Steven J Kean, Linda Robertson, Rebecca W Cantrell, Leslie Lawner, rcarroll@bracepatt.com, Sarah Novosel, Mark Palmer X-cc: X-bcc: X-Folder: \Steven_Kean_June2001_4\Notes Folders\Discussion threads X-Origin: KEAN-S X-FileName: skean.nsf The following report is comprised of what was discussed at the Commission meeting held tonight at approximately 7 PM EST and additional intelligence gathered from FERC staffers after the meeting by Joe Hartsoe: Physical Withholding -- To prevent physical withholding, the plan will require sellers with PGA's to offer all their available power in real time. All California generators, even those not subject to FERC price regulation, will be required to sell into the ISO's real time market as a condition of their use of the ISO's interstate transmission lines. Hydroelectric facilities will be exempted. (24-7 for 1yr) Price Mitigation - The plan will establish a single market clearing price auction for the real time market. During Stage 1, 2 and 3 emergencies in the ISO's real time market, each generator (other than hydro) with a participating generator agreement is required to offer all available power and bid its marginal cost based on the generator's heat curve, emission rates, gas costs and emission costs, plus $2 for O&M. The gas cost will be the average daily cost of gas for all delivery points in California; emissions are to be based on Cammon Fitzgerald(?). The gas cost and emissions will be published the day after, for use on the following day. A single market clearing price is determined in real time for all generators. Highest bid sets the clearing price. Each gas fired generator must file with FERC and the ISO, on a confidential basis, heat and emission rates for each generating unit. The ISO will use these rates to calculate a marginal cost for each generator, including maintenance and operating costs. In the event a generator submits a bid higher than the proxy price, the generator must, within 7 days of the end of each month, file a report with FERC and the ISO justifying its price. FERC has 60 days to review/act. No opportunity costs in real time. Marketers are in the same boat, as they must be prepared to justify bid at purchased cost based on specific purchases or portfolio with no opportunity cost. However, credit sleeves are permissible. Demand Response - Beginning June 1, only public utility load serving entities must submit demand side bids to curtail load and identify the load to be curtailed under those bids. FERC is attempting to break the demand curve. (24-7) Outages -- PGA generators will coordinate planned outages and report forced outages in accordance with the Commission Staff proposal adopted by FERC. Term - Order expires one year from date of issuance. RTO Filing - California ISO and two Utilities must make RTO filing by June 1 or Order lapses with no further effect. ISO Reporting - On September 14, 2001, ISO must file a status report on how things are working and how much generation has been built. Comments are due in 15 days. Quarterly reports thereafter. Revocation of Market Based Rate Authority and Refunds - The market based rate authority of all public utilities is conditioned on 1) no physical withhold of capacity, and 2) no inappropriate bidding behavior. Inappropriate bidding behavior includes bidding unrelated to known characteristics of the generation unit or without an input cost basis or bidding not based on unit behavior. An increased bid based on increased demand could apparently be inappropriate. In addition, "hockey stick" bids are expressly prohibited (i.e. bidding 95% at marginal cost and 5% at a much higher level). Limited 206 filing - Applies to sales in the WSCC, outside California. Refund conditions apply in real time spot markets when contingency within a control area falls below 7%. Control areas are not required to publish when this condition occurs. Apparently anything over marginal cost must be justified. All marketers and non-hydroelectric generators must offer to sell contractually and physically available capacity/energy to a location within WSCC. FERC is attempting to mirror the rules applied in California. Comments are due in 10 days on the 206 investigations. The refund effective date is 60 days from publication of the Order. Nox Limits in California -- Must sell requirements do not apply if a unit is prohibited from running by law. However, it appears that incurring fines does not overcome the must sell requirement- just include the fines as part of the price bid. Also if Nox is limited, may seek to show that generation would have been sold elsewhere or at different times for determining price. Surcharge to pay past amount due -- Comments are due in 30 days on 1) whether FERC should require the ISO to surcharge parties for payment into an escrow account to pay past costs and 2) the effect this surcharge would have on the PG&E bankruptcy filing. No mention was made at the meeting as to issue of exports of power from California. The Order is not finally drafted as of yet, and the status of the foregoing items could change upon issuance of the Final Order. We will keep you posted. RA
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